By Key themes discussed at the two-day Semex dairy conference in Glasgow, held on January 13th and 14th, were the increasing global dairy demand, driving market growth, and the importance of increased efficiency in order to harness export potential.
Owen Paterson, Defra Secretary of State, opened the conference by highlighting the importance of the UK dairy industry and commented that it is one of the largest sectors in the food industry - worth £10 billion a year. The Secretary of State claimed that UK dairying has an excellent international reputation due to its robust traceability, rigorous production standards and top quality produce. Mr Paterson stated that global dairy demand is forecast to grow at a rate of 2.3% per year for the next 10 years. To meet such an increase will require the equivalent of bringing on-stream an extra New Zealand dairy industry every year. In addition, the UK is still importing £1.2 billion of dairy products each year. The government is backing the plans of Dairy Co, Dairy UK and the NFU - contained in the "Leading the way" strategy - to reduce the UK trade balance in dairy products to zero by 2025.
NFU President Peter Kendall supported self-sufficiency claims by saying that the "Leading the Way" trade deficit target is realistic. The UK has favourable production conditions and is also in a good position to take advantage of the EU milk quota abolition in April 2015. To meet this target, the country would require an additional 4 billion litres of milk which could be possibly achieved by increasing herd size by half a million and yield per cow by 4%. Mr Kendall commented on the need for both the dairy farming and processing sectors to invest in growth and innovation to drive industry efficiency in order to compete globally.
Dr Greg Betherd, consultant from the US, suggested that farmers operating in a dairy commodity market need to focus on achieving lower costs per litre. The milk to feed price ratio is a good indicator to compare the relative directions of milk and feed prices. However, Dr Betherd commented that it is also very important to look at the margin of income over feed cost when comparing the efficiency of the dairy enterprise. Both dairy products and farm inputs prices fluctuate depending on supply and demand in the market. This puts pressure on running a profitable enterprise. To help with this, many farmers currently use risk management tools in the US e.g. hedging the price of their milk produce and forward buying their feed and other farming inputs.
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